FINANCIAL AUDIT DIVISION REPORT Metro Gang Strike Force

Special Review5ConclusionsThe Metro Gang Strike Force’s internal controls were not adequate to safeguardseized and forfeited property, properly authorize its financial transactions,accurately record its financial activity in the accounting records, and conduct itsfinancial activities in a reasonable and prudent manner. The Metro Gang StrikeForce was unable to account for at least 18,1264 of seized cash and could notlocate or support the legal disposition of at least 13 forfeited vehicles and oneseized vehicle held as evidence.The Metro Gang Strike Force did not comply with some finance-related legalrequirements for seized and forfeited property.The Minnesota Gang and Drug Oversight Council and the Metro Gang StrikeForce Advisory Board did not provide sufficient oversight of the Metro GangStrike Force’s financial activity.The following Findings and Recommendations further explain the basis for theseconclusions.4In its response to the draft report, the Ramsey County Sheriff’s Office, the Metro Gang StrikeForce’s fiscal agent through December 31, 2008, asserted that it had deposited 2,960 of thisamount, and that the unaccounted for amount was actually 15,166. We did not validate thisclaim.

Special Review7Findings and RecommendationsInadequate Internal Controls and Financial PracticesThe Metro Gang Strike Force did not properly deposit or account for allseized cash.After a complete review of strike force and fiscal agent documentation offorfeited cash transactions, we were unable to substantiate the disposition of 18,126 of forfeited cash.5 The strike force’s records showed that on 15occasions, from September 2004 through July 2008, cash was removed from theproperty room, but the fiscal agent had no record of a corresponding deposit.The strike force’s seized cash process lacked fundamental internal controls, asfollows: The strike force did not deposit seized cash immediately with the fiscalagent. The strike force held seized cash in the property room for extendedperiods. For example, during August through November 2008, the strikeforce deposited about 378,000 that it accumulated over a lengthy periodof time. As of February 2009, the strike force still had on hand nearly 400,000 of seized cash, some of which related to cases dating back to2000 when the strike force’s former commander was the head of theMinnesota Gang Strike Force.6The former commander told us he believed that the inability to producethe actual cash seized as evidence at trial would negatively affect theoutcome of the case. The oversight council’s operating procedures andguidelines stated that digital pictures of seized cash were acceptableevidence at court trials and required that all seized cash be depositedimmediately with the fiscal agent. Other law enforcement agencies wespoke with, including the state’s Bureau of Criminal Apprehension,followed this practice. The delay in depositing this cash increased the riskof loss or theft.5In its response to the draft report, the Ramsey County Sheriff’s Office, the Metro Gang StrikeForce’s fiscal agent through December 31, 2008, asserted that it had deposited 2,960 of thisamount, and that the unaccounted for amount was actually 15,166. We did not validate thisclaim.6In 2005, the Legislature dissolved the Minnesota Gang Strike Force and created the MinnesotaDrug and Gang Oversight Council with a mandate to establish and supervise multi-jurisdictionaltask forces and strike forces across the state, including a metro gang strike force.Finding 1

8Metro Gang Strike Force The strike force did not maintain adequate records of cash seizures. Theadministrative assistant’s tracking records were not complete to track theflow of cash. Once the former commander prepared a deposit, theadministrative assistant would delete these transactions from her trackingrecord so that her record would only include cash held in the propertyroom. She also did not always update the tracking records when seizedcash was returned to the owner. Without a complete record of thedisposition of the seized cash, there was no assurance that all cashremoved from the property room was actually deposited. The strike force did not adequately separate incompatible duties. Once theinvestigators brought the seized cash to the office, only the administrativeassistant had access to the cash, the receipt tracking records, and theinvestigators’ case files. No one independent of the cash handling processverified that the cash seizures reported in the case files and the receipttracking records agreed to cash held or deposited with the fiscal agent.Once the strike force decided that it would make a deposit, the strikeforce’s former commander had complete control of the deposit process.He notified the administrative assistant when funds were forfeited andcleared for deposit, prepared the deposit, and brought the funds to thefiscal agent. He sometimes made errors in his deposit memos to the fiscalagent; in 13 instances, he inaccurately identified related case numbers orhad math errors. The strike force’s former commander did not havesomeone review the deposit memos or verify the supporting currencycount sheet. Such a review could have detected these errors. The strike force sometimes bypassed the fiscal agent deposit process andused seized cash for other purposes. We identified three instances whenseized cash, totaling 15,111, was not deposited with the fiscal agent andused directly for confidential informant activities. We also identified oneinstance when the strike force deposited 11,657 of seized funds into its“travel and training” account. To maintain appropriate accountabilityover seized cash, the strike force should have deposited these funds withits fiscal agent.This lack of fundamental internal controls created an unacceptable risk of fraudand, together with the discrepancies identified, made it impossible for us toconclude that all seized cash was either held in the property room or depositedwith the fiscal agent.Recommendations The strike force should immediately deposit all seized cashwith its fiscal agent.

Special Review9 The strike force should comply with the oversight council’soperating procedures and guidelines for seizures. The strike force should develop fundamental internal controlsfor its cash receipts process, including maintaining accurateaccounting records, separating incompatible duties, andreconciling the case files, the accounting records, and thedeposits.The Metro Gang Strike Force did not adequately safeguard or account forseized or forfeited vehicles.The strike force could not locate 13 of the 80 vehicles forfeited between August2005 and October 2008. The strike force’s records and the case files did notcontain information to document the vehicles’ locations.Through theadministrative forfeiture process, seized vehicles that are forfeited become theproperty of the strike force. The Department of Public Safety provided us withevidence showing that as of April 2009 these vehicles had active titles, and threeof them were still registered to the person they were seized from or a lien holder.In addition to the 13 forfeited vehicles, the strike force was also unable to locateone seized vehicle it was holding pending a court hearing.The strike force’s vehicle seizure process lacked fundamental internal controls.The strike force did not have accurate records to show the location of seized andforfeited vehicles. Although the strike force had a contract for towing andimpound services, strike force investigators sometimes had the cars towed to otherlaw enforcement impound lots. The strike force’s vehicle tracking report was notalways consistent with the information contained in the criminal case files aboutwhere a vehicle was actually towed.The oversight council’s operating procedures and guidelines did not adequatelyaddress vehicle seizure and tracking practices. Without formal operatingprocedures, there is an increased risk that the strike force will not properlysafeguard and account for seized and forfeited vehicles.Recommendations The strike force should develop fundamental internal controlsfor its vehicle seizure and forfeiture process, includingmaintaining accurate inventory records. The system shouldinclude information about the location of the vehicles, thestatus of forfeiture proceedings, and the final disposition ofvehicles.Finding 2

10Metro Gang Strike Force Finding 3The strike force should develop formal policies that addresstowing and storing of seized vehicles and tracking seized andforfeited vehicles.The Metro Gang Strike Force did not establish sufficient internal controlsfor other seized property.The strike force did not adequately account for and secure seized property. Welearned of the following two instances when strike force personnel improperlyhandled seized property: The former strike force commander sold a seized flat screen television for 30 to a student worker employed by the Department of Public Safetyworking at the strike force. When the original owner later had a legalright to get the television back, the strike force had to recover the TV andrefund the money to the employee. The administrative assistant gave some seized jewelry determined to haveno value to another Department of Public Safety employee working at thestrike force. Later, the employee’s supervisor required her to return thejewelry to the strike force.In addition, the strike force’s property room lacked basic physical security, andinventory records did not agree to items in the property room. We saw numerousitems in the property room that the strike force’s records identified as destroyed.In addition, we were unable to find 7 of a sample of 62 items recorded oninventory records. Strike force personnel did not periodically compare itsinventory records to items held in its property room.In 2006, the Department of Public Safety’s Office of Justice Programs approved agrant to the strike force that it could have used to obtain a computerized inventorysystem for its evidence and seized property. The Project Safe Neighborhood Grantfor 168,000 provided funding to the strike force for technological equipment,software, and services. The strike force used some of these funds for othertechnology needs. However, because the strike force failed to submit a needsassessment, the Department of Public Safety cancelled 73,000 of the grant.Recommendations The strike force should dispose of seized property inaccordance with applicable rules and regulations. The strike force should ensure that the property room hasadequate physical security.

Special Review11 The strike force should maintain accurate inventory records. Itshould consider obtaining a computerized inventory system. The strike force should conduct a periodic physical inventoryof the property room to ensure the accuracy and integrity ofthe property room’s inventory records.The Metro Gang Strike Force did not have sufficient administrative staff toconduct its operations.Finding 4The strike force had one administrative assistant to perform all of itsadministrative functions. This person maintained all of the inventory records, wasthe property room custodian, was responsible for two local checking accounts,controlled the confidential informant funds, sent seizure notices to the AttorneyGeneral’s Office, obtained reimbursements from the fiscal agent, maintained thecase files, and performed other office functions, such as answering phones andproviding clerical services. The strike force had not documented the workperformed by this person or developed any backup plans in the event of thisperson’s absence.The administrative assistant told us that she often worked weekends and eveningsto try to keep up with her workload, and that even on her vacation days, shewould regularly report to the office. Nevertheless, the oversight council’s annualevaluation of the strike force’s operations identified weaknesses in areas under theadministrative assistant’s control. By relying on one person for so much of itsadministrative functions, the strike force increased the risk of a breakdown in itsfinancial operations.Recommendations The strike force should ensure that it has sufficientadministrative resources to carry out its financial operations. The strike force should document key aspects of its financialoperations.The Metro Gang Strike Force did not adequately segregate key duties overits local checking accounts and did not adequately control some of theaccounts’ activities.The strike force did not segregate incompatible duties for checking accounts it hasfor its confidential informants and “training and travel” activities. Theadministrative assistant performed all functions related to these accounts. Shesigned all the checks, reconciled the bank statements, requested, endorsed, andFinding 5

12Metro Gang Strike Forcedeposited or cashed the checks from the fiscal agent, prepared the deposits, andmade cash withdrawals for both accounts. From July 2005 through March 2009,the fiscal agent replenished about 138,000 to the confidential informant accountand reimbursed about 56,000 to the training and travel account.The strike force did not always obtain funds for the travel and training accountthrough reimbursement from the fiscal agent. We identified two instances whenthis occurred. Finding 1 discussed the inappropriate deposit of 11,657 forfeitedcash. In addition, the strike force inappropriately deposited into the travel andtraining account 12,252 from Reachout, Inc., identified by the formercommander as a donation to be used for strike force vehicle repairs.A good system of internal controls requires that policies and procedures are inplace to ensure that receipts are properly safeguarded, deposited, and recorded,and an adequate segregation of duties exists. The lack of proper segregation ofduties increased the risk of errors or irregularities from occurring and not beingdetected and created an unacceptable risk of fraud.RecommendationsFinding 6 The strike force should ensure an adequate segregation ofduties over the local checking accounts to ensure that no oneperson has complete control of the process. The strike force should only deposit reimbursements from thefiscal agent into the training and travel account.The Metro Gang Strike Force did not properly use or control its confidentialinformant fund activity.The Metro Gang Strike Force failed to comply with the oversight council’soperating procedures and guidelines and its own internal procedures related to theconfidential informant fund. The strike force used this fund to pay confidentialinformants for information about criminal activity, to purchase evidenceassociated with criminal activity, and to purchase services and equipment forauthorized undercover operations. The strike force mainly funded this activitythrough the grant from Department of Public Safety. It could supplement thegrant funds with forfeitures. The strike force had the following weaknesses in itsadministration of this fund: The strike force inappropriately used about 5,100 of confidential informantfunds for unallowable or unreasonable purposes, including the following:¾ 1,807 for evidence room shelving.

Special Review13¾ 1,000 advanced to the assistant commander without sufficientdocumentation.¾ 850 advanced to investigators for evidence purchases that were notsupported by information in the case files.¾ 600 for a travel advance.¾ 279 advanced to the former commander in violation of the oversightcouncil’s guidelines, which prohibit a strike force commander to disburseconfidential informant funds to himself.¾ 250 to purchase beverages at a bar for an investigator and/or informant.¾ 138 reimbursed to the council’s statewide coordinator for office supplies.¾ 103 for a canister vacuum.¾ 72 for doughnuts during a search warrant briefing. The fiscal agent did not perform an effective reconciliation of the confidentialinformant account. He did not reconcile the account to an authorized balance,did not resolve variances identified on the reconciliations, did not include allconfidential informant funds in the reconciliation, and could not reconstructprior months’ reconciliations because he overwrote the files. The former commander kept 1,400 of seized funds in his office in case anofficer needed confidential informant funds when the administrative assistantwas not available. Strike force staff could not tell us how these funds wereused, reimbursed, reconciled, or the dispo

2 million each fiscal year. The strike force's fiscal agent reported forfeited money and property to be 125,913, 148,238, and 394,283 for fiscal years 2006, 2007, and 2008, respectively. As noted in the findings in this report, the strike force did not deposit all forfeiture proceeds with the fiscal agent. Minnesota Statutes